Global markets tumble on Huawei CFO arrest; Sensex ends 1.6% lower

Stock markets around the world fell sharply on Thursday as investors dumped risky assets on worries that the relationship between the US and China could worsen following the arrest of a high-profile Chinese executive.

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Major global markets tumbled about 2 per cent or more, while Brent crude prices fell over 4 per cent to trade below $60 a barrel. The Sensex ended 572 points, or 1.6 per cent, lower to close at 35,312, while the Nifty 50 index plunged 182 points, or 1.7 per cent, to 10,601. It was the biggest single-day fall for the Indian benchmark indices in nearly two months. The rupee ended at 70.90 compared to the previous day’s close of 70.46 against the dollar.

Canadian authorities late on Wednesday said they had arrested smartphone maker Huawei Technologies’ Chief Financial Officer Meng Wanzhou on December 1, the same day that US President Donald Trump and Chinese leader Xi Jinping met at the G20 summit in Argentina. Meng, the daughter of Huawei’s founder, faces extradition to the US over possible violations of Iran sanctions.

The move led to a meltdown in global equities as investors feared the relations between the world’s two biggest economies could deteriorate and hurt global economic growth. Wall Street joined the global stocks sell-off, opening sharply lower as the Dow Jones Industrial Average slid about 2 per cent and the broad-based S&P 500 1.6 per cent. Europe’s benchmark indices fell nearly 3 per cent, while Japan’s Nikkei 225 declined 2 per cent. Hong Kong and China markets ended in the red too.

“It’s a bloodbath today. The risk aversion trade has returned with vengeance. The entire trade truce element between the US and China, which promoted some optimism in the market, is under a huge threat after the arrest," Naeem Aslam, chief market analyst, Think Markets, told Bloomberg.

Thursday’s fall comes at a time when investor sentiment is already weak after a bond market gauge raised fears of recession for the US economy.

The yield curve, the difference between long- and short-term notes, flattened for the first time in more than a decade, a phenomenon that has occurred before previous recessions. The yield on the 10-year US Treasury note slid below 2.9 per cent on Thursday.

All the 19 BSE sectoral indices ended with losses, with the BSE Energy index declining the most at 2.35 per cent amid a meltdown in global commodity prices. The BSE Auto index fell 2.3 per cent.

Reliance Industries and Infosys were the biggest drag on the Sensex with the former declining nearly 3 per cent and the latter dropping close to 2 per cent.

Maruti Suzuki and Tata Motors were the biggest losers on the benchmark index, with each declining more than 4 per cent. Sun Pharma was the only advancing stock on the Sensex. Shares of the pharma major rose 1.6 per cent a day after slumping to their lowest close in nearly six years.

The India Vix index, a gauge for market volatility, soared 5.6 per cent to 19.4. The small and midcap indices saw a slightly deeper fall. About 1,850 stocks fell and 707 stocks advanced on the BSE.

Besides global headwinds, domestic investors are also cautious due to political uncertainty.

“Capital markets had a rough day, as they are trying to navigate too many data points such as re-emergence of sharp weakness in Indian rupee, upcoming OPEC meeting outcome in terms of production cut, and upcoming results of five state assembly elections. The nervousness is quite evident, as there is sharp sell–off across the industries," said Jagannadham Thunuguntla, head of research (wealth), Centrum Broking.-